Understanding Employer-Assisted Housing

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Understanding Employer-Assisted Housing

• As presented by Amy L. W. Hosier. Ph.D,
• Director of Research and Policy
• Homes for Working Families
• To The Drachman Institute
• The University of Arizona
• April, 4, 2008

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Our Work

• Homes for Working Families is a national,
  nonprofit organization dedicated to advancing
  policy changes that enable more of Americas
  working families to find safe, good-quality homes
  they can afford.

• Focus on moderate-income households, those
  generally earning between 60 and 120 of area
  median income.
• Offer best practices, policy solutions, data,
  public opinion and topical research, and
  promising tactics to address home affordability
  challenges.
• Create local coalitions by bringing together
  business executives, policy-makers, and civic
  leaders to identify and lend their leverage to
  local policy solutions.

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Affordability Gap

• Homes Fors research paints a difficult
  affordability picture for middle-income
  households in both strong and weak markets.
• The situation is unlikely to improve greatly in
  the short and medium term. Credit is tightening,
  limiting households room to maneuver in gaining
  and maintaining mortgage finance.
• While house prices are falling, they are
  unlikely to fall enough to restore affordability
  to historically more normal levels. These
  findings strongly indicate that continued efforts
  are needed from policy-makers, lenders and
  employers to ensure households access to homes.

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Current environment recession already plagues
part of the country
In recession
Near recession
Expansion
Source Moodys Economy.com
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An Unprecedented Housing Downturn...
change from peak, Sources Fiserv Lending
Solutions, Census, Moody's Economy.com
House price
Home sales
Housing starts
Forecast peak-to-trough
Peak to 2007Q3
90s peak to trough
80s peak to trough
Source Moodys Economy.com
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Housing Least Affordable on East and West Coasts
Housing affordability index, 2007Q3
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Credit Quality Deteriorates Most on the
Coasts Change in first mortgage delinquency rate,
05Q4 to 07Q4, of
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Faster Price Growth for Cheaper Homes Los
Angeles CSI tiered house-price indexes,
2000Q1100, SA
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Home Affordability Gap
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Increase in Annual Household Spending, 2000-2005
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Median Home Price vs. Median Household Income
Tucson and Phoenix
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Affordability Gap Phoenix and Tucson
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What Is EAH?

• Employer-assisted housing encompasses any type of
  housing or housing-related benefit that an
  employer provides
• Housing benefits historically offered by
  employers for relocation and/or recruiting senior
  positions
• Todays EAH includes a variety of benefits for
  employers to help their workforce afford and
  access homes and to achieve other goals

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Drivers to Create an EAH Program

• Persistent disparity between home purchase and
  rental costs and wages
• Long, increasingly costly commutes
• Helping workforce to achieve better work-life
  balance
• Creating more sustainable communities good
  civics and good business
• A flexible, family-friendly employee benefit that
  is easy to administer and is cost-effective

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EAH Makes Good Business Sense

• Enhances recruitment efforts in an increasingly
  competitive labor market
• Increases employee retention, company loyalty,
  and job satisfaction
• Improves workforce dependability
• Improves workforce and community stability
• Leads to cost-savings
• Dovetails with community betterment programs
• Improves company reputation
• Can help create greener, more sustainable
  communities
• It works, its easy, and its cheap (Henry
  Webber, University of Chicago)

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Employer-Assisted Housing
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• EAH program started in 2002
• Developed as a partnership with NeighborWorks
  Columbus, a private, community-based, nonprofit
  organization.
• Designed to increase employee morale,
  productivity and well-being, as well as increase
  investment in the surrounding community.
• Program Details

• 1,000 no strings attached grant for down
  payment assistance loan is increased to 5,000
  for home purchases in target areas.
• Program is restricted to first time homebuyers.
• Homeownership and financial counseling are
  required for all program participants.

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• 200 employees have received homeownership and
  financial counseling 44 have purchased their
  first homes through the program.
• Implementation Insight
• By limiting the program to first-time homebuyers,
  Aflac was able to target its desired income group
  without adding further restrictions to its
  program.
• Making more money available to employees for
  the purchase of homes in a
  targeted neighborhood did not correlate with
  a greater number of employees purchasing homes
  in that area.

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• Applied Materials helps to make homes more
  affordable by funding the Housing Trust of Santa
  Clara County.
• Has committed 1.4 million to the Housing Trust
  of Santa Clara County since 2000.
• Designed to aid recruitment and increase
  affordable home opportunities for other critical
  workers in the area.

• Housing Trust of Santa Clara County Program
  Details
• Up to 6,500 in down payment assistance for
  first-time homebuyers. (Up to 120 percent of AMI)
  
• Low-cost financing for qualifies developers of
  affordable multifamily rental units. (Up to 80
  percent of AMI)

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• Nearly 2,000 families, including 10 Applied
  Materials employees, have used the first-time
  homebuyer assistance 1,200 affordable rental
  homes have been created.
• Applied Materials used peer-to-peer approach to
  raise funds for Housing Trust program.
• The model used for the EAH program brought
  together a variety of representatives from
  community organizations, businesses and
  government in a partnership that benefits
  everyone in the community.

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• Home Buyer Assistance Program began in 2002.
• Designed to help provide employees with
  meaningful assistance to mitigate the high cost
  of homes in many markets where the company does
  business.
• Program Details

• 5,000 loan for the purchase of a primary
  residence loan is increased to 8,000 for home
  purchases in select area.
• Loan is completely forgiven provided the employee
  remains with the company for five years.
• First-time homebuyers are required to receive
  credit counseling (also available to all
  employees).
• Eligible employees must have worked for CFG for
  at least one year, have a base salary of less
  than 100,000 and must work 20 or more hours per
  week.

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• 3,100 employees nationwide have received loans
  to purchase homes of that number, 188 have
  received loans for 8,000 to purchase homes in
  designated emerging communities.
• Since 2002, CFG has committed 17 million in
  forgivable loans through the program.

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• Prescriptions for Homeownership started in
  2005.
• 500 grant for closing cost assistance, which is
  matched by lending partner.
• Homebuyer education and counseling.
• Designed to recruit pharmacists and other
  employees in high-cost D.C. housing market.
• 160 employees have received
  homebuyer education and counseling
  50 have purchased homes.
• Launched program in Los Angeles in
  2007 in 2008 will launch in Chicago,
  Cleveland and Detroit.
• CVS believes its decision to partner with a
  faith based organization provided a
  level of employee privacy and trust.

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• Walk to Work launched in 2000.
• 2,500 in down payment assistance for home
  purchases in select area.
• Homebuyer education and counseling.
• Third-party administration of program.
• Designed to strengthen the community and increase
  employee satisfaction.
• From 2000 to 2005, 70 employees received
  homebuyer education and counseling 27
  purchased homes in the target area
  surrounding company headquarters.
• Program resulted in more employees
  living in neighborhoods around the
  headquarters, which has strengthened
  the surrounding community.

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• EAH program started in 1991.
• All full time employees are eligible.
• Average assistance 5,500 for a home purchase,
  500 for refinancing and 600 per year for rent.
• Various discounts on services related to
  purchasing, refinancing or renting a home.
• Program administered by membership-based
  third-party organization.
• Designed to help recruit and retain employees in
  a high-cost housing market.
• From 1996 to July 2007, 43 employees took
  advantage of the program 24 purchased
  homes, 17 refinanced and two used rental
  assistance.

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• Long Island program began in 2004 Mississippi
  Gulf Coast Program began in 2005.
• Long Island 5,000 grant for down payment on a
  primary residence. 3-to-1 matching grant money
  also available through state program. Homebuyer
  education.
• Gulf Coast Up to 7,500 for first-time
  homebuyers or employees who are either building,
  purchasing or rebuilding homes post-Katrina.
  3-to-1 matching grant money available through
  local business development corporation.
• By October 2007, 20 Long Island
  employees received homebuyer education
  and nine purchased homes.
• NGSS executives have determined that it
  costs approximately 50,000 to 60,000 to
  replace an employee. The EAH benefit
  costs approximately 7,500 to 9,500 per
  employee. NGSS anticipates the EAH program
  will increase retention, leading to
  significant cost savings.

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• EAH program started in 2000.
• Invests in the development of new affordable
  homes.
• Down payment assistance (household income at or
  below 80 percent of the statewide median income)
  and homebuyer education (all employees).
• Administered through a public-private-nonprofit
  partnership.
• Designed to create affordable home opportunities
  in an area where the housing supply is tight.
• 120 homes were built in the first phase of
  development. The second phase will add
  up to 82 more homes.
• 40 employees received homebuyer
  education 13 purchased homes in
  affordable development.

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• EAH program launched in 2000.
• Employees must be full time employees earning up
  to 80 percent of the area median income.
• 5,000 interest-free loan for down payment on
  home in select area.
• The employee must contribute either 1,000 or 1
  percent of the purchase price of the home,
  whichever is greater, toward the downpayment.
• Homebuyer education and financial counseling.
• Third-party administration of program.
• Designed to help recruit skilled workers and
  combat higher than normal rates of
  absenteeism.
• By June 2007, 122 employees received
  homebuyer education and financial counseling
  67 purchased homes.
• System Sensors management team calculated
  that the program not only recouped its
  initial investment, but ultimately
  saved approximately 100,000 per year in
  the form of workforce stability.

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• EAH program began in 2003.
• 7,500 interest-free forgivable loan for down
  payment and closing costs.
• Homebuyer education and credit counseling.
• Designed to promote homeownership and investment
  in targeted redeveloping areas surrounding the
  university.
• 450 employees participated in the homebuyer
  education and credit counseling services
  158 employees purchased homes with the down
  payment assistance, 11 of whom
  received matching funds from the state.

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How to Create and Implement EAH Determine Your
Companys Needs

• Conduct a needs assessment
• Review local housing market conditions
• Perform an internal business analysis
• Employee demand for housing benefits/assistance
• External community relations considerations
• Assess your companys unique HR needs
• Ongoing and anticipated recruitment challenges
• Retention and productivity issues
• How EAH would work with respect to overall
  benefits package

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How to Create and Implement EAH Design a Program

• Identify specific goals for the program, for
  example
• Increasing employee homeownership and workforce
  stability
• Recruiting and/or relocating employees
• Reducing commute times to improve morale and to
  decrease absenteeism and tardiness
• Revitalizing neighborhoods adjacent to employers
  facility
• Prepare the EAH business case, including factors
  such as
• Current conditions versus desired business
  outcomes gaps
• Turnover costs versus program costs
• Comparison of implementation methods internal
  versus third-party administrator

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How to Create and Implement EAH Design a Program

• Determine EAH offerings
• Homebuyer assistance
• Financial assistance
• Homeownership education and counseling
• Rental assistance
• Search assistance
• Financial assistance
• New construction projects
• Renovation assistance
• Assistance to at-risk homeowners in current
  environment

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How to Create and Implement EAH Design a Program

• Establish Employee Eligibility
• Criteria can include
• Employee or household income limits
• First-time homebuyers only
• Duration of tenure with company
• Personal financial resources to be provided by
  employee
• Location of housing to be assisted (e.g., near
  workplace, in revitalization area)

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How to Create and Implement EAH Design a Program

• Establish Employee Eligibility
• Important considerations
• Amount company is able to allocate to the program
• Fairness across workforce
• Business goals of program
• Administrative capacity (internal and/or
  external)

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How to Create and Implement EAH Implementation

• Establish budget and timeline
• Determine administration methods internal
  administration and/or outsourcing program
  elements to a third-party partner
• An important consideration is ensuring employee
  privacy
• Potential partners include nonprofit housing
  organizations, banks, local governments, housing
  trust funds, and local governments

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How to Create and Implement EAH Implementation

• Marketing
• Internal marketing is absolutely critical to the
  success of an EAH program
• Educate employees about the new opportunities
  available to them at the start
• Conduct ongoing marketing to ensure lasting
  participation
• Consider external marketing if goals include
  community revitalization and use of program as a
  recruitment tool

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How to Create and Implement EAH Implementation

• EAH Program Assessment
• In order to understand your programs
  effectiveness in meeting its goals, regular
  evaluation of the program is essential
• Your needs assessment will provide baseline
  indicators against which to measure progress and
  return on investment
• Surveys of participating and nonparticipating
  employees are useful tools
• Adjust your program as your market and business
  needs evolve

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How to Create and Implement EAH Implementation

• Tax Considerations
• Federal income tax treatment depends on type of
  assistance employer provides
• Direct payments to employees (e.g., down payment,
  closing cost, or rental assistance) or payments
  to a third party partner on behalf of an employee
  are treated as compensation
• For loans, loan guarantees, and mortgage
  assistance (interest write-downs), foregone
  interest and forgiven loan amounts are treated as
  compensation, taxable for the employee
• Rules do not generally apply to below-market or
  interest free loans up to 10,000

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How to Create and Implement EAH Implementation

• ERISA Considerations
• In most instances, EAH programs are subject to
  ERISA only if funded through a trust fund or
  other arrangement in which financial assistance
  is not made from the employers general assets
• If sponsored by a governmental entity or church,
  the program is exempt
• Consultation with tax advisers prior to
  implementation is important

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How to Create and Implement EAH Implementation

• State and federal legislation that can help
• Existing and pending legislation in 15 states
  supports EAH through tax credits and other
  incentives
• For example, Illinois provides employers with
  state tax credits of .50/1for qualified
  affordable housing investments
• The Housing Americas Workforce Act (S1078 and
  HR1850) was introduced in 2007
• Provides a 50 federal tax credit to employers
  for home purchase and rental benefits to their
  low and moderate-income employees
• Includes housing as a tax-free employee benefit,
  such as healthcare
• Establishes a competitive grant program available
  to nonprofit organizations to provide EAH program
  administration, technical assistance, and
  counseling

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Homes For Working FamiliesOther Resources

• Increasing the Availability of Affordable Homes
• Understanding Employer-Assisted Housing
• Analyzing Affordability in Metropolitan Housing
  Markets An Examination of Affordability for
  Middle-Income Households, Moodys Economy.com
  research commissioned by Homes for Working
  Families
• Share Your Story Web forum
• Public opinion and topical research
• www.homesforworkingfamilies.org